Loss of patents will likely lead to the collapse of suits against HP and NVIDIA

Rambus, Inc. (RMBS) has been in dire straits in federal court. Now its situation has became a whole lot worse as the U.S. Patent and Trademark Office has invalidated three of the company's most critical patents.

I. The End?

From 2004 onwards Rambus had been enjoying fat royalties [1][2][3] from a host of top chipmakers. But since Nov. 2011 the company has suffered several key setbacks as companies like Micron Technology, Inc. (MU) and Hynix Semiconductor Inc. (KS:000660) have challenged the legality of Rambus's patents and licensing demands. The biggest -- a $4B USD loss in its suit against Micron and Hynix -- sent Rambus shares plummeting.

An appeals board at the U.S. Patent and Trademark Office ruled two key Rambus patents invalid in September. A third patent was ruled invalid in a new ruling that landed on Jan. 24. Reuters was the first to discover it, reporting on the issue this week.

The trio of patents were invalidated known as the "Barth patents", after their author, Rambus employee Richard Barth. The patents -- U.S. Patents 6,470,405; 6,591,353; and 7,287,109 -- dealt with methods for sending data to memory on a personal computer device.

Rambus traditionally used the three patents among its six core patents in its litigious efforts.

The options for Rambus in terms of overturning the invalidation are scant. An appeal would go back to the original reviewer, who would be unlikely to wish to overturn the ruling of the higher board, according to Scott Daniels, a partner in the law firm Westerman, Hattori, Daniels and Adrian, LLP.

The decision is a victory for NVIDIA Corp. (NVDA) who initially requested the review. Rambus has been filing both federal court civil suits against NVIDIA alleging billions in infringement losses, and filing complaints with the U.S. International Trade Commission looking to block the import of NVIDIA chips into the U.S. on copyright infringement grounds.

The ruling is a victory for NVIDIA (CEO Jen-Hsun Huang pictured) who requested the review. [Image Source: WebOS Nation]

The decision, should it stand, calls into question a whole slew of Rambus victories both in court and in licensing agreements. With Rambus down to three important patents in hand, its leverage is severely reduced. Rambus shares are down 15 percent since the ruling landed, and are likely to fall further as the fallout in terms of settlements begins.

Rambus still holds 1,000 patents, but it's increasingly looking more like an acquisitions target than a viable firm.

The Rambus case is an unfortunate one, in which Rambus did once have some legitimately good ideas and produce useful products. This outcome serves as a reminder to litigious companies like Microsoft Corp. (MSFT) [1][2][3][4], Apple, Inc. (AAPL) [1][2][3][4], and Samsung Electronics Comp., Ltd. (KS:005930) [1][2][3] of the dangers of pushing the patent system and litigation too far. Ultimately Rambus didn't have the rich commercial history of any of the aforementioned firms in terms of putting out useful consumer and business products.

It's easy to write off Rambus as just another "patent troll", but unlike ex-Microsoft CEO Nathan Myhrvold's Intellectual Ventures , Rambus was once a legitimate technology producer. In that regards it is similar to NTP -- another former innovator turned mass-litigator.

Regardless, history aside, it appears that the curtain has fallen on Rambus's days of success in federal court. And experts are cheering that as a victory for the consumer and for shareholders in chipmaking firms.

Actually XDR memory is very innovative and it's the taiwanese memory cartel that won't let it succeed...However first impressions of Pentium 4's with hideously expensive RDRAM is very difficult to wash off :)

Yeah it was a interesting technology, still it was way to expensive and complicated.

quote: and it's the taiwanese memory cartel that won't let it succeed

Yes of course it was not.

It was used in a product, that was dominated by (semi)open standards, and if you ware first a part of the open standard panel, and don't disclose you have pending patents on proposed standards, you can expect the survivors of the dagger you put in there back, to some day to return the same service!

Rambus memory was more expensive cause it's technology relied on more complex silicon and more chips, also Intel engineers admitted that RDRAM was seriously flawed and it was them who made it work while the Rambus engineers were taking it easy...

at the time the PS3 was designed, XDR ram and their FlexIO was the best technology available. Do no forget the Cell processor is not exactly cheap to make. who knows what the current costs to manufacture the PS3 is.

Well, I recall the Nintendo 64 used Rambus memory. You even had the Ram Expansion pack for it.

As for the Cell being "expensive" to make, I doubt that's true.It's 120mm² at 65nm, Conroe at 65nm was 143mm², so it's smaller than Core 2 at the same fabrication process.

The Core 2 Duo E4300 was incredibly cheap back in it's day and Intel would have had a healthy amount of profit on top of that.

Plus 65nm is an old process technology which would be incredibly cheap these days, newer process technologies aren't always cheap. - It's one of the reasons AMD is sticking with 45nm for it's Low-end and Mid-Range parts in the 7000 series.

The Cell was designed for consoles, Televisions and Blu-ray players, cost to manufacture is a major factor for a chip like that as it has to go in more cost-sensitive products.

quote: As for the Cell being "expensive" to make, I doubt that's true.

Cell is a microprocessor architecture jointly developed by Sony, Sony Computer Entertainment, Toshiba, and IBM, an alliance known as "STI". The architectural design and first implementation were carried out at the STI Design Center in Austin, Texas over a four-year period beginning March 2001 on a budget reported by Sony as approaching US$400 million.

Yes, as did the PS2. As I recall, eliminating the PS2 EmotionEngine (CPU) and RAMBUS memory from later models of PS3 only provided significant savings over the 20GB and 60GB NTSC models because of the RAMBUS memory. Basically, the 80GB partial BC and 60GB PAL consoles still had a GraphicsSynthesizer (GPU) from a PS2 even though the PS2 had long had the EE+GS combined on a single chip. It doesn't make sense to produce a GS for the PS3 while still producing an EE+GS for PS2 consoles unless the dedicated memory eliminated with the EE was a significant cost (emulated EE with the Cell and system memory).

Cell debuted at 90nm, not 65nm. Yields were atrocious, and it was a completely new design of CPU.

It was designed to be an all-purpose chip, true, but initially it was a hot, expensive, insane beast. Remember, teardowns of the PS3 in 2006 had the cost of technology at $100 over what Sony was charging; ie they were losing money for at least the first 6 months on the thing.

Poetic justice that Rambus should be on the ropes after so many years of holding the semiconductor industry hostage with frivolus lawsuits and threats. Their business model should read: if we can't make it in the marketplace with first rate technology, we'll litigate our way to prosperity. Just last year, their CEO was quoted as saying that companies '....should know better than take on Rambus in court....'. We'll, Mr. Hughes, the joke's on you.

Rambus should be vigorously prosecuted under the RICO act to serve as example for future patent Mafiosos. The higher-ups should get some serious jail time. Other white-collar thugs like the RIAA should be next in line.

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke